WASHINGTON ¾ With today's new forecast by the Congressional Budget Office showing that the projected non-Social Security surplus is gone ¾ not just this year but for several years to come ¾ The Concord Coalition called upon President Bush and Congress to reestablish the goal of balancing the budget without using the Social Security surplus. The Coalition emphasized the following points from the new CBO projections:
- Last year the CBO projected a 10-year non-Social Security surplus of $3.1 trillion. Now, just one year later, the projection over the same 10-year period (2002-2011) has plunged to a deficit of $742 billion.
- Over the new projection period (2003-2012) there is a non-Social Security deficit of $242 billion, even though the surplus for two of those years (2011 and 2012) is inflated by the budget gimmick enacted last year that assumes Congress will allow all provisions of the 2001 tax cut bill to expire at the end of 2010.
- Last January there were non-Social Security surpluses projected for every year. This January, there is no annual non-Social Security surplus projected again until 2010.
- Over 80 percent of the total projected surplus (Social Security and non-Social Security combined) comes in 2008 through 2012, the last five years of the forecast.
- Almost half (48 percent) of the total projected surplus comes in the last two years of the forecast (2011 and 2012), due in large part to the tax cut “sunset” gimmick, which adds about $600 billion to the 10-year surplus.
“One of the most dramatic consequences of the deteriorating budget outlook is that we're back to using the Social Security surplus to help balance the budget. What was said to be a fiscal and political ‘firewall' has come down due to a combination of factors. The cause of its demise can be debated on the campaign trail this year. But the purpose of the firewall ¾ to use the Social Security surplus as a means of increasing national savings in anticipation of the program's long-term unfunded obligations ¾ is still a sound one. We must begin to rebuild the firewall,” said Concord Coalition Executive Director Robert Bixby.
“Temporarily using the Social Security surplus in response to both recession and military conflict is not by itself a major problem. But it will quickly become a major problem if politicians once again get comfortable with the idea. Before that happens, some markers must be laid down. The first step is commitment to a goal. And the best goal is the one that commands strong bipartisan support ¾ balancing the budget without using the Social Security surplus,” Bixby said.
The Concord Coalition has recommend five fiscal policy guidelines to help ensure that the long-term fiscal health of our nation is not sacrificed to short-term concerns:
· Reaffirm the fiscally responsible goal of balancing the budget without using the Social Security surplus. It may take a few years to achieve, but unless the goal is set there is a clear danger of drifting back into an era of sustained deficits. We cannot afford taking such a risk in advance of the huge fiscal challenges that loom just beyond the 10-year budget window.
· Recognize that the post-September 11 environment requires a careful examination of budgetary priorities. Policymakers can no longer delude themselves that large perpetual budget surpluses will allow them to avoid making hard choices, not just for the long-term, but now. Everything should be on the table.
· If it is decided that an economic stimulus bill is needed, it should be carefully designed to have its maximum effect in the very near future, minimize costs in later years, and provide the most bang for the buck. Back loaded options, whether tax cuts or spending increases, are not the right method of providing short-term economic stimulus.
· Establish a new budgetary enforcement framework to replace the expiring provisions of the 1997 Balanced Budget Act. The prospect of renewed budget deficits makes this all the more important. A realistic set of spending caps and renewal of some type of pay-as-you-go rule for mandatory spending and tax provisions would help achieve the goal of returning to non-Social Security surpluses.
· Don't put Social Security reform on the back burner. There is no good reason why this issue should be kept off the 2002 legislative agenda. The demographic and fiscal challenges facing Social Security in the years ahead are well known. What's needed now is rejection of the Do Nothing Plan.